Fast-fashion empire Inditex sees profits dip

Spanish global clothing giant Inditex, owner of fast-fashion brand Zara, announced Wednesday a rare fall in quarterly profits even as it pushed ahead with an aggressive international expansion.

Fast-fashion empire Inditex sees profits dip
Zara is part of the Inditex fashion group, owned by Amancio Ortego — the world's third's richest man according to Forbes magazine. Photo: AFP

Inditex, created 40 years ago in the northwestern Galicia region by railwayman's son Amancio Ortega, said net profit fell 7.3 percent from the same period a year earlier to €406 million ($550 million) in the three months to April 30th.

It was the group's first reported profit decline since 2009.    

Sales rose a modest 4.3 percent to €3.75 billion, Inditex said in a statement.

The group said its revenue figure was affected by adverse currency exchanges, adding that in local currencies sales were up 11 percent.

Even in tough economic times, the group has pursued a worldwide expansion policy first installed by Ortega, Spain's richest man and still Inditex's biggest shareholder. Ortega retired as chairman and chief executive in 2011, handing over to Pablo Isla.

"All of Inditex's brands continue to expand internationally," said Inditex, which besides Zara owns major retail brands including Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterque.

Inditex said it opened a net 53 stores in the quarter, growing its global store network to 6,393 stores in 88 markets.

"We continue to see significant opportunities for growth for Inditex in the world," Inditex chairman Pablo Isla said during a conference call with analysts after the results were released.

Inditex said it will begin sales of its Zara brand via the Internet in Mexico and South Korea.

The company will expand its online offer in China with the launch of an online store in the Tmall e-commerce platform.

Inditex now offers online sales in 25 countries — 21 European nations plus Canada, China, Japan and the United States.

The group said it would hold an annual general meeting on July 15 where it will propose paying shareholders a 2013 dividend of €2.42 for each share, of which half was paid last month and the balance would be paid November 3rd.

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Zara founder Amancio Ortega enters renewable energy sector

Spanish billionaire Amancio Ortega, founder of the biggest fast fashion group in the world, has entered the renewable energy sector with the purchase of a stake in a wind farm run by energy giant Repsol.

Amancio Ortega
Amancio Ortega is the founder of Inditex, which includes flagship store Zara, Zara Home, Massimo Dutti, Bershka, Oysho, Pull&Bear, Stradivarius, Uterqüe and Lefties. Photo: Miguel Riopa

Ortega’s investment holding Pontegadea will pay €245 million euros ($281 million) for a 49 percent stake in the Delta wind farm in the northern province of Zaragoza, Repsol said in a statement Thursday.

Opened in March, the wind farm will produce 992 gigawatt hours (GWh) of 100 percent renewable energy a year, the equivalent to the average annual consumption of 300,000 households, the Spanish firm added.

Pontegadea chief executive Roberto Cibeira said the deal “strengthens the environmental commitment that accompanies all the activities in our portfolio”.

Ortega’s investment holding in 2019 bought a five percent stake in Spanish gas grid operator Enagas, and it owns a five percent stake in Spanish electricity grid operator Red Electrica.

This is Pontegadea’s first operation in the renewables sector.

Demand for renewable energy assets has soared in recent years, with investors spending billions of dollars to gain exposure to the sector as governments promote low-carbon energy and crack down on fossil fuels to fight global warming.

Ortega’s Pontegadea owns a 59.3 percent stake in Zara owner Inditex, as well as investments worth billions of euros in prime office and shopping districts.

These are largely debt-free purchases using dividend payouts from Inditex.

Pontegadea’s global real estate empire includes offices used by Facebook and Amazon in Seattle and large swathes of London’s Oxford Street.

Amancio Ortega is the founder of Inditex, the biggest fashion group in the world, which includes flagship store Zara, Zara Home, Massimo Dutti, Bershka, Oysho, Pull&Bear, Stradivarius, Uterqüe and Lefties.

Now 85, he became a billionaire and Spain’s richest man at 65 when Inditex was listed in 2001. Funds from the flotation were used to set up Pontegadea, which is structured as a private limited company.